As a record low 10-year fix mortgage arrives at just 2.39% should you lock in long-term or keep your options open?

Coventry Building Society has launched the cheapest-ever 10-year fixed-rate mortgage at 2.39 per cent, just as research suggests seven in 10 househunters want to lock into low rates for longer.

The only snag is that borrowers need a deposit or equity in their home equal to 50 per cent of the value of the property to qualify - and there's a £999 fee.

That said, the length of the deal pretty much cancels out the cost of the fee - seeing as you'll save on continually paying new sets of fees each time you were to renew a two-year fix, for example.

But for many the question about fixing for ten years won't just surround saving on fees, it will also be a worry about locking in for so long.

Borrower appetite to fix mortgage rates for a decade is growing as lenders provide more options

The prospect of knowing what your monthly payments will be all the way to 2026 is tempting. Go with the Coventry BS loan and on a mortgage of £150,000, monthly repayments would be £664.65.

And Coventry isn't the only lender improving the options for borrowers keen to fix for longer. West Bromwich is launching at 2.79 per cent from Friday to 65 per cent LTV with a £199 fee for purchases. Barclays has today launched a 2.79 per cent 10-year fixed rate up to 60 per cent loan to value with a £999 fee.

And HSBC has also cut rates again and is now offering its own 10-year fix at 2.79 per cent up to 70 per cent loan-to-value. If you have just 20 per cent to put into a purchase or remortgage, you can still lock in for 10 years with HSBC at 2.99 per cent up to 80% LTV.

The HSBC deals don't charge a fee and Coventry is also offering a fee-free option priced at 2.69 per cent over 10 years up to 50 per cent LTV.

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Over a shorter-term fix, high fees can make deals with cheap rates cost more than slightly higher rates with no fee.

But, because these deals spread the fee over a full decade, Coventry's fee-free option actually costs more over the 10 years than the cheaper Coventry rate - at £82,484.17 compared to £80,756.49.

Because the rate is higher, monthly repayments are also higher at £687.37.

Why would you want a ten-year fix?

Most fixed rate mortgages come with early repayment charges meaning if you need to move house before the end of the 10 years you could end up paying through the nose.

Tracie Pearce, HSBC’s head of mortgages, said: '2026 might seem like a lifetime away yet our research shows that we like to plan ahead and are currently looking for security.'

Indeed that research suggests Millennials - those who turned 18 in the year 2000 - are most likely to seek mortgage stability with 78 per cent willing to consider fixing for 10 years.

Seven out of 10 Londoners also want to lock in to low mortgage rates for the next decade.

Andrew Montlake, of mortgage broker Coreco, said: 'Ten-year fixes have never really taken off before but these new rates may well change this as borrowers are enticed by the low rate and additional security that such rates offer.

'It will be interesting to see how low these rates can go and how long lenders are prepared to keep these products available for.'

Rachel Springall, of personal finance site Moneyfacts, said borrower appetite to fix mortgage rates for a decade is growing as lenders provide more options.

Coventry may have the lowest 10-year fixed rate on the market but HSBC offers competitive deals for those with smaller deposits or less equity built up in their homes

What do you need to watch out for?

Following the Brexit vote last month swap rates - which broadly influence mortgage rates - have fallen through the floor giving lenders much more scope to offer low rates for longer.

Springall added: 'This trend may well continue to grow in times of uncertainty but borrowers must always work out the true cost of any deal and be sure that their circumstances will remain relatively unchanged for the next 10 years.'

This is the rub: most fixed-rate mortgages come with early repayment charges meaning if you need to move house before the end of the 10 years and cannot take the mortgage with you because you no longer qualify under the lender's criteria, you could end up paying through the nose.

For example Barclays will charge 6 per cent in the first seven years before it drops to 3 per cent in. If you need to redeem the mortgage in the first two years of the Coventry deal, you'll pay 5 per cent of the mortgage balance. For the next three years the charge is 3 per cent and even in the final five years you will still pay 1 per cent.

Mark Harris, of mortgage broker SPF Private Clients, said: ‘It is a great time to fix, however, whether you should fix for this long depends on your circumstances. For example, if a first-time buyer is purchasing with friends the chances are that within a 10-year time frame your circumstances will change.

'Those who are more settled - married with children in school, for example - may find the longer fix more amenable. Most products are portable and can be taken with you when you move but the lender will require you to meet their policy requirements at the time of porting.'

Colin Payne, of broker Chapelgate Finance, added this type of product is a 'no-brainer' for 40 or 50-somethings who have made that final move until they retire.

'There will be many families up and down the country that fall into this category,' he added.

Although Coventry and HSBC are offering the most headline-grabbing rates there are also competitive options from Leeds Building Society, Nationwide, Santander and Barclays.

If you think you're likely to stay put for 10 years and want the security of fixing for that long but you want a 'get-out clause' then TSB has a range of 10-year fixes with some that only tie you in for five year,s which is unusual and gives more flexibility.

Harris said: ‘However, instead of taking such a long fix you may wish to consider a shorter one. There are five-year fixes with only three years of early repayment charges. There are even some fixes with no ERCs at all. Alternatively, plump for a tracker and hope base rate doesn’t go up.'

Mark Carney, governor of the Bank of England, has dropped hints he may cut the base rate next Thursday

What will happen to rates in the future?

While the path of interest rates over the next 10 years is anybody's guess, the Bank of England is widely expected to cut the base rate next Thursday when the Monetary Policy Committee meets - from 0.5 per cent to 0.25 per cent.

Payne said: 'I think over the coming weeks that we will see further reductions and it will be during this period that borrowers should look to take advantage.

Nobody knows for sure what will happen with interest rates but what we do know is that fixed rates are the lowest we have ever seen. Don’t be too greedy

'Lenders will be looking to claw back lost ground where the property market slowed up to and after the EU referendum and are going to look to cut rates to attract business over the next three to four months. I wouldn't envisage rates continuing to drop beyond this timeline.'

But borrowers worried about whether or not low mortgage rates will last or if they should lock in now have a few options. If your deal is coming to an end this autumn it may not be necessary to pay any ERCs at all.

Lenders’ mortgage offers are typically valid for six months so by going through the application process now, you could reserve your deal from here until the end of the year.

But Harris warned: ‘Nobody knows for sure what will happen with interest rates but what we do know is that fixed rates are the lowest we have ever seen. Don’t be too greedy.

‘End dates change throughout the year - just bear in mind that the application process could take eight weeks from start to finish so if the end date is July 2018 and you are only applying now, you will not benefit from the whole two years.'

Halifax, Barclays, NatWest and Santander’s latest rates end on 30 September, while Nationwide rates are valid from two years post the date of completion.

Those who borrowed at significantly higher rates a couple of years ago because they had a lower deposit may well find that due to increases in property values, it's worth considering remortgaging at a now lower loan-to-value and paying the ERC.

Rob Killeen, of mortgage broker Capital Fortune, said: 'Whether or not this makes sense depends on the size of the mortgage and the size of the ERC. We would advise speaking to a specialist about this, specifically going through the detail as to what the charges will be to replace the mortgage versus any savings that would then be saved moving forward.'